Below
is criteria developed to help evaluate Trader IQ in terms of both length of time to learn our trade
and the various ingredients considered in the traders
development regimen.
Grade
Learning Time
Intelligence Level
10
Born with it
Super Genius
09
Born with it
Genius
08
One Year
Mental Giant
07
Two Years
Above Average
06
Three
Years
Average
05
Four
Years
Some
Learning Difficulty
04
Five
Years
Great
Learning Difficulty
03
Never
Insufficient
Aptitude
After analyzing the levels of human aptitude, we then examine
other ingredients of trader success. These 15 categories
help to analyze trader potential:
Number
Category
01
Aptitude
(Trader IQ)
02
Attitude
03
Confidence
04
Discipline
05
Education
& Experience
06
Focus
07
Life Style
08
Money
Management
09
Patience
10
Personal
Goal
11
Perseverance
12
Psychological
Makeup
13
Risk
Management
14
Social Needs
15
Success
in Prior Life Works
The
brief definition of each of category provides a forum for
your completion of the Trader IQ Test.Each of the 15 categories has a potential value of 10
points making 150 a perfect score.
No perfect scores are anticipated since neither Einstein nor
Newton are expected to be taking the test.
Note:This
evaluation has not been evaluated by a qualified psychologist
and therefore may misstate stringent rules defining concepts
of psychology. We're simply trying help readers grasp the
concept of Trader IQ so they may understand the range of
consideration elements that need to be evaluated prior to
launching into the business.
Enter
a number between 1 and 10, 10 being best, into the drop down
adjacent to each category; click submit when you are ready for
your test to be evaluated. Your evaluation will be returned
by reply eMail. To obtain evaluation of your test,
submit your test. We will look at your scores in
comparison to other traders' input to produce objective
analysis. Your input will be maintained in the strictest
of confidence.
Answer
01 Aptitude (IQ)
Think of this as all mental faculties including
memory, ability to grasp complex concepts, speed of identifying
all activities needed to get ready to execute trade entry and
exit, selecting the right course at the right time and being
able to put it all together.If you graduated from college at 17, give yourself a 9.If you needed special tutoring to get through 9th
grade mathematics, score yourself 5.Since you are not Isaac Newton or Albert Einstein, you
are likely ineligible for 10!
Answer
02 Attitude
Norman
Vincent Peal wrote The Power of Positive Mental Attitude
and many have read it.I
am confident you come to the ‘trading table’ with a positive
attitude.That’s
not enough!The
fact is that, after some trade losses, your attitude will become
altered from positive to negative.You must be on guard to manage such an attitude change
and reverse the trend.When it happens, you must step aside from trading to enable
“Attitude Adjustment.”If you wake up every morning ready and eager to observe
the market open and have completed your daily research the day
before and are ready to trade, give yourself a 10 in this
category.This is
one of the few “10” scores expected of a trader.
Answer
03 Confidence
Self-confidence counts for a lot in life but even
more in trading!Without
confidence, you will not succeed and, like attitude, your
confidence will change when you suffer losses. Expect losses but
keep them small with tight stops.If you wake up every morning confident you will make
money today, give yourself a 10.Just know to quit trading on days when your confidence
fails you.Remember
the market must cooperate with your assessment of it.Choppy trading days are better abandoned for more rewarding
time with sweetheart, children, beach, golf or bowling.
Answer
04 Discipline
Trading requires study and research. A
regular rigorous regimen is required.Professionally active traders research and prepare for
trading tomorrow with great rigor.Every day, including weekends, they study and prepare by
scanning charts and analyze candle chart patterns.When you regularly practice such a routine, give yourself a
10. When you do it only a couple days a week a 5 would be the more
appropriate score.
Answer
05 Education & Experience
If
you worked 20+ years in a successful career and have a masters
or doctorate degree, a 10 could be appropriate.For less education and/or experience, deduct points
appropriately.Remember
about ego… success in a prior career is not immediately
transferable to trading.
Answer
06Focus
Trading
requires concentration.It
will be difficult to trade effectively if your children enter your
trading space during market hours.Avoid reading your eMail and turn the phone off.Discourage friends and family from contacting you during
this time.Instruct
your trading associates to allow you quiet undisturbed time to
focus.Handle
pressing life matters during market doldrums and then get back to
work.Take two
15-minute breaks during market hours and then take a longer break
after the close before you begin the daily research regimen.Focus may be the category in which you rate yourself the
lowest.If you are able to handle only the work of trading from bell
to bell except for a quick bite to eat and necessary trips to
satisfy human needs, give yourself a 10.
Answer
07 Life Style
Successful part time traders are rare.Successful part time traders are those rare individuals
who took time off from their other life’s interests and
learned to trade effectively and now have found newer interests
more fulfilling than trading on a full time basis.These traders know how to screen for trades a couple days
a week, place their few choice trades, protected by appropriate
stops, and then move on to their main career interest the
remainder of the day.But my personal belief is that to trade well requires
full-time focus on trading; so to learn it, you must like it.I know you want to make money trading but I’m not certain
you’re willing to pay the price to get it.
To become successful, you must climb into the
profession with both feet and become immersed in the cloak of
learning and learning and learning only what is essential to
trade effectively.You
must learn what information to embrace and what information
overload to cast to the side of the stream as you navigate your
way through treacherous waters.
If you notice the life style to be demanding,
especially on the west coast where the markets open at 6:30 AM,
and this timing is not for you, immediately abandon your course
or learn how to live with it.If you have anyone who demands attention when you’re
trading, perhaps you should trade away from home in an office.If your wife, parents, or other confidants are negative
to your trading interest, quit.Their negative influence will poison your course and you
will quit eventually anyway… so, you might as well quit now…
ahead of the almost guaranteed draw down in your account.There is no point in waiting to quit just after losing
some money… especially so they can say… “I told you so!”Be confident you will lose some money in the market.Think of loses as one element of training, education and
experience tuition.If your life style is absolutely in line with
your interest in the markets, give yourself a 10.
Answer
08 Money Management
The main thrust to risk management is knowing
where and when to stop.Every
trading book I have read or reviewed… more than 25 at latest
count… has a section on this topic.For example, never risk more that 1% or (2% maximum) of
your trading account.Stop trading after three consecutive losses on the day.Stop trading entirely for a temporary period if you lose a
lot of your account.
Example Account Control System:Regardless of wealth, I recommend new traders
start trading with a minimum capitalization of $50,000 but with
only a deposit of $30,000 in their active trading account.The remainder must be kept in liquid form at a bank where
it can easily be wired to your trading account as needed.In order to protect your initial capital, I recommend you
state a promise to yourself that before you lose 40% of it, you
will quit trading -- at least for 90 to 180 days while you obtain
more education, training and experience in trading.
Trading Account Handling Formula: See example at: Account
Answer
09 Patience
It
has been my observation that the optimum trader would have
been an arcade game enthusiast as a child, skateboard pipe
rider as a young adolescent and surfer in the late teens.Surfers searching the rambling ocean for the ‘right’
wave two hundred yards in the distance learn patience and
judgment.Judgment
in trading makes all the difference intraday.Intraday traders must await confirmed setups and then
pounce… just like a bear fishing in a cold mountain stream.Just imagine the bear looking into the stream searching
for the right fish.There
is only one ‘right moment’ for each trade.Finding it requires calm patience and critical
judgment. The best teachers have patience.People who revert to road rage lack patience.You know your own patience and whether or not you have
it, so if you are a patient person, rate yourself high.
Answer
10 Personal Goal
What
do you want?Do
you want to double your trading account?By the way, let’s talk about trading account size as
compared to personal wealth.Currently, the SEC and NASD require pattern day traders
to maintain a $25,000 balance in their account. Therefore, to
avoid margin calls, you need to maintain your trading account
at or above $30,000.My
personal opinion is for all traders, new or experienced,
regardless of prior market trading success, to maintain
between $30,000 and $40,000 in the trading account.This will enable you to pay yourself weekly or monthly
as you grow your account.Remember, you don’t need $100,000 or more to trade
well.I know a
trader who earned $250,000 starting with $11,500 in six
months.This
trader paid himself every week (sometimes twice) not allowing
his account to exceed $50,000 generally.
Answer
11 Perseverance
Sticktoitiveness is a special word for drive and
determination.There
are wandering geniuses searching for interests, causes and
direction throughout the world.As an interested trader, you have temporarily completed
your search and embarked on one extremely difficult journey.Perhaps you’ve embraced trading as an interest
because good fortune amassed some money within your control.Many, actually most, individuals get only one chance…
the chance to keep their money or, possibly, learn how to grow
it.
Blindly jumping into trading
for a living before you know everything you need to know will
put you in the poor house so quickly it will produce
insurmountable doubt.Just
ask about a hundred thousand “temporarily wealthy”
individuals who lost considerable amounts of money in 2000 and
2001 trying to play in the major league.Look around at others interested in trading wherever
you are.Imagine
being able to identify the one in 20 who will remain in the
game a year from now.Will
it be you?It
will be only if you persevere.I don’t care how smart you are.Your IQ could be genius level but, unless you commit to
this interest as a full time career as well as your desirable
life style, you will fail!If you are trading in one year with some trading loses
and some trading gains but are in complete
control of your stop loss system, assign a higher grade to
this factor.
Answer
12 Psychological Makeup
How bad do you want it?You must want it more than anything before in your life
because it will be harder than anything you’ve ever tried
before.Trading
attracts a lot of successful people…. successful in former
careers.How else
do people get money to trade aside from becoming successful in
their walk with life?Steal,
swindle, con, deal drugs, rob… I don’t think so!To trade, you must be smart, and you must want to do it
so badly that you know you can stick with it through the tough
learning curve… required seat time.
Here is the problem:Successful people suffer from ego.Many would be traders believe that, because they have
been successful in their prior career, they will just be a
natural trader.
Trading is war!Trading requires more discipline than any other
profession I know.Traders
go to war daily, fighting money battles throughout each long
day.Recognize
this:Firemen don’t fight fires every day.Police don’t fight with fugitives every day, nor is the
military at war and engaged with the enemy every day.Professional boxers fight only occasionally.Sparing with boxing partners is not a fight; it’s just
practice where the combatants wear head protection.But traders enter into battle every day they put money
on the line.
Think about it!Do
you have the stamina to sustain the bruises to your pocket
book when the market turns quickly on you?Can you stay in there fighting day in and day out to
get the job done?Be
careful now.Don’t just answer yes (because you really want it) without
thinking deeply about risk, because there are many variables
that you will undergo as you develop.Any number of these variables will put you out of the
business.You must be strong to survive the game.If you have humility, knowing the financial markets are
smarter than you, and can live with having your ego crushed
three days out of five, rate your score higher.
Answer
13 Risk Management
The main thrust to this category is
knowing where and when to stop.
In addition one must clearly understand the upside potential
for a trade along with the downside loss. When you are
able to calculate the Reward to Risk Ratio in your head before
every trade, you are ready to rate your self a 10 in this
category. Every trading book I have ever reviewed…
more than 25 of them… has a section on this topic.For example, never risk more that 1% or 2% (maximum) of
your trading account on trade positions.Stop trading after three consecutive losses on the day.Stop trading entirely (temporarily) if you lose a
significant portion of your account.
Answer
14 Social Needs
If you are young and
like to stay out partying all night, this profession is not
for you!If you
are young and have your social life under control, you are a
contender.Adequate
sleep is essential to be at your best when researching as well
as when actually trading.You must be stable in your life environment to succeed
in this vocation.In
times of layoffs producing career change, many embrace the
profession of trading as a possible consideration.Consider it, but enter knowing full well that it is a
new career and the learning curve is years, not weeks or even
months.If your
social environment and personal needs lend themselves to
isolation, focus and concentration of trading and learning
everything you will need, mark your score high.
Answer
15 Success
in Prior Life Works
In
the category above, the topic of ego was discussed.Guarding against the detriment of a big ego, you can look
back into your prior career success.To the extent you have been successful, you can count
on being successful at trading, but only after learning the
essential ingredients of all 16 compartments of knowledge
discussed in my paper,
The Ice Tray[der] Story at: Story.
Click to Calculate your
Total Score
Legend:
Score >
135 = 90% Grade A = Highly Suitable for Potential Top Trader
Score > 120 = 80% Grade B = Suitable for Trading Success
Score > 105 = 70% Grade C = Will Struggle with Trading Success
Score > 90 = 60% Grade D = Guard your Capital with your
Life
Score < 90 = Trader Aptitude Not Suitable for Trading
Disclaimer:
Trading in securities may not be for all individuals. Consult
your advisor or other professional to determine your
suitability. This is not an offer to buy or sell securities. The
information given is of a general nature and should not be taken
as a recommendation to buy or sell securities. Anyone using this
information agrees to take full responsibility for their own
trades.
